Where DOES the Money Go?: How to Deal with Money in the Marijuana Industry


Imagine you’re running a small, local, grocery store. You have your customers, your employees, your suppliers, etc. Now, at the end of the day you balance your till, lock the doors behind you, and quite literally hide your earnings under your mattress. Sounds crazy right? This is the reality that marijuana dispensary owners face every day. Because banks are federally regulated and marijuana remains illegal under federal law, banks are weary of working with marijuana-related businesses. It’s estimated that 70% of dispensary owners do not have a bank account, leading all of them to run a completely cash business. So, exactly how do you run a business without a bank?

The Guidelines and the Worries
During 2014, the Obama administration issued guidelines allowing banks to serve legal, marijuana-related businesses. But, even with these guidelines in place, banks are choosing not to take the risk or front the money to be in compliance. Rob Rowe, Vice President and Associate Chief Counsel of Regulatory Compliance for the American Bankers Association says, “…banking a marijuana business is risky.”

Why Do Marijuana-Related Businesses Need Access To Banks?
Creating a brick-and-mortar startup has it’s roadblocks, even in the most favorable conditions. So, imagine starting a company with no business loans, no line of credit, no payroll system? That’s right, it’s all cash. And cash is not easy and, surprisingly, not cheap. On top of paying employees, vendors, and bills in cash, retaining highly-skilled bookkeepers and accountants, you still need a physical area to KEEP your cash.

With the having a cash-based business comes another problem — robberies. Dave Ross, Resident of MMJ America, runs eight successful stores that can sometimes bring in “hundreds of thousands of dollars in cash” a month. The risk of robbery with Dave and other marijuana business owners is a real issue. The Denver PD have logged over 200 burglaries at marijuana businesses. So, the question is, do you use your resources to hire security when that money can go toward improving your product?

Where Do The Taxes Go?
Though obtaining a bank account is a next to impossible task, states are more than willing to reap the tax benefits of legal marijuana sales. So, where does the money go? Then answer is, well, it’s complicated. For simplification purposes, let’s take a look at Colorado. In 2016, marijuana sales reached $1.3 Billion with $19.8 Million in tax revenue.

An easy breakdown for the most-talked about funds:

  • $40MIL goes to the BEST (Building Excellent Schools Today fund), going towards renovating and replacing public schools
  • Around $18 million went to the Department of Public Health and Environment to fund various programs, including $6.7 million to substance abuse prevention grants
  • $3MIL to the Department of Agriculture
  • $1MIL to the Attorney General’s office
  • $8.4MIL to the Department of Education for various programs, half of which going to Early Literacy Competitive Grant Program
  • $216,944 to the Governor’s Office, most of which funded the Office of Marijuana Coordination

Are you a legal marijuana business owner having banking issues. We’d love to get your take on the marijuana banking crisis.

Originally published at www.medicalmarijuana.com on September 15, 2017.